James W. Cornelsen is president and CEO of Old Line Bank. (Baltimore Sun photo by Jed…)
When last we checked in with Old Line Bancshares, the financial hurricane of 2008 was full-blown. Bankers everywhere were washed out. But the Bowie-based lender was barely ruffled, like the guy in the old commercials sipping Baltimore-brewed Colt 45 amid danger and mayhem.
Old Line Bank hasn't emerged from the storm unscratched. That would have required divine guidance. But it's doing what good companies always do in a downturn: It's taking advantage of rivals' errors and building market share.
Its acquisition two weeks ago of Maryland Bankcorp, parent of Maryland Bank & Trust, basically doubles Old Line's size and makes it a peer of Sandy Spring Bank, Columbia Bank, 1st Mariner Bank and Severn Savings Bank, the largest Maryland-based banking companies serving the central part of the state.
Old Line's northernmost branch is in Crofton, but it's scouting locations in northern Anne Arundel County as well as Howard County, and isn't ruling out Baltimore in the long term.
"Our trend is certainly north, and that gets us closer to Baltimore," says James W. Cornelsen, Old Line's chief executive. "We're definitely looking at branching opportunities again. It's just got to be the right opportunity."
In business, as in life, saying "no" to the wrong opportunity is two-thirds of success. At this, Old Line has excelled.
It avoided making stupid housing loans during the bubble. It focused on borrowers' incomes, not on evanescent collateral value. In November 2008, as the stock market was crashing, homeowners and businesses were defaulting and national banks were being bailed out by billions of dollars, every single one of Old Line's borrowers was current on payments.
Over the next two years the bank had to write off a couple of real estate-related loans and a loan to a church. But it all added up to less than $2 million, not terribly serious for a bank with $36 million in equity capital and assets of $400 million.
At the height of the storm, to be prudent, Old Line took $7 million in federal "TARP" bailout money and then became the first Maryland bank to pay TARP money back, a few months later. Billions in TARP loans are still outstanding, and billions will never be paid back.
Old Line's stock sank beneath $5 in March 2009 but closed Monday at $8.85.
As the economy began to recover, Cornelsen, who has been with the bank since 1994, began looking again for opportunities to grow. Unlike many executives, he's optimistic about the region's economic future, even in the face of deficit reduction and uncertainty about federal spending.
Old Line's territory, which includes Anne Arundel, Prince George's, Charles and St. Mary's counties, "is loaded with military bases that are just beefing up tremendously — mostly with government intellectual enterprises" that will thrive even as war budgets diminish, Cornelsen says.
Installations such as Fort Meade, Patuxent River Naval Air Station and Andrews Air Force Base have "a direct connection to Washington, D.C., irrespective of what the budget issues are," he says. He believes that that many underestimate the long-term growth contribution of the nationwide military base realignment that has begun to bring jobs to Maryland in recent years.
As Old Line's stock recovered, Cornelsen gained the currency to pursue something he says he had long contemplated: combining with a rival. Like many lenders, Lexington Park-based Maryland Bank & Trust had been weakened by substantial amounts of soured loans. Old Line offered MB&T shareholders a takeover deal of $20 million, mostly in Old Line shares, and the transaction closed April 1.
The combined company now has 20 branches and $750 million in assets, making it about half the size of Columbia Bank, slightly smaller than 1st Mariner and the same size as Severn Savings Bank. With "superb deposits and low-cost funding," writes Christopher Marinac, who follows Old Line's stock for Atlanta-based FIG Partners, "the company should be able to hit the ground running."
If, that is, Cornelsen can combine the banks without too much expense and headache.
"Old Line has its work cut out for it," says Bert Ely, a banking analyst based in Alexandria, Va. "This is a big challenge. They're taking on a bank of the same size with a lot more problems. They're going to have to deal with those problem assets" — including $5 million in foreclosed land and buildings, as of December.
Ironically, working out problem loans probably isn't Old Line management's top skill: It has so few of them.
Cornelsen doesn't foresee merger trauma. He says the companies use the same technology vendors and already work together well.
"We know their customers. We know their employees," he says of MB&T. "We know the collateral to a specific loan. That's a great advantage."
"Banker" has become a dirty word in three years. But don't forget that beyond Goldman Sachs and Bank of America are companies such as Old Line, plying their trade the old-fashioned way: Planning for the long term and making money for their shareholders without government welfare.